Pound tumbles as data shows UK growth has stalled
THE United Kingdom’s economy suffered its weakest growth since 2012 in the first three months of this year, with heavy snow only partly to blame, prompting investors to slash their bets on a Bank of England rate rise next month.
Britain’s economy grew by just 0.1pc in the first quarter of 2018, well below the Bank of England’s prediction of 0.3pc and at the bottom end of economists’ forecasts in a Reuters poll, official data showed yester day. Sterling tumbled by more than a cent against the dollar, and expectations of an interest rate rise next month sank.
“A very weak Q1 GDP print has ended the chances of a rate hike in May. For us, it means no hike at all in 2018,” John Wraith, a market strategist at UBS, said.
In year-on-year terms, growth slowed to 1.2pc from 1.4pc, its weakest since the second quarter of 2012 and a rate likely to keep Britain lagging behind its international peers.
A spokesman for British Prime Minister Theresa May said the numbers were “clearly disappointing”, but played down suggestions that uncertainty over Brexit was to blame.
The slowdown from already modest quarterly growth of 0.4pc in the fourth quarter of 2017 was driven by a sharp fall in construction output.
Unusually heavy snow storms in late February and early March, dubbed “the Beast from the East”, were known to have hurt some businesses before yesterday’s data.
But the Office for National Statistics said the problems went beyond that.
“While the snow had some impact, particularly in construction and some areas of retail, its overall effect was limited with the bad weather actually boosting energy supply and online sales,” ONS statistician Rob Kent-Smith said.
Consumer-facing businesses also slowed in the first quarter, the ONS said, probably reflecting higher inflation.
The pound’s fall after the June 2016 Brexit vote eroded households’ disposable income throughout last year.
The scale of the slowdown may unsettle Bankl of England interest rate setters, who next week begin considering whether to raise rates on May 10 for the second time since 2008. (Reuters)